S&P Ratings: Tariffs will hurt retail, restaurant companies to varying degrees
Broad-based tariffs could hurt more U.S. consumer products and retail companies this time around more than in 2018, which was more manageable.
That’s according to a commentary by S&P Global Ratings, which noted that more than 24% of retail credits and 19% of consumer credits have negative outlooks, indicating an above-average negative bias and little headroom for additional macroeconomic pressures.
S&P notes that price increases will be harder to pass along to the consumer this time compared to 2018 because of the recent inflation cycle and already weak consumer environment.
"Given the heterogeneity and global supply chain footprint of the consumer products and retail and restaurant industries, examining the tariff impacts requires knowledge of each company's product, supply, and manufacturing mix,” said Bea Chiem, retail and consumer manager director, S&P Global Ratings. “Subsector impacts vary widely depending upon this mix.”
Companies cannot rely solely on price increases to mitigate the extra costs imposed by tariffs, according to Chiem. Retailers will ultimately have to decide how much they can and will pass on to the end consumer.
S&P Global Ratings believes there is a high degree of unpredictability around policy implementation by the U.S. administration and possible responses — specifically with regard to tariffs — and the potential effect on economies, supply chain and credit conditions around the world.
“As a result, our baseline forecasts carry a significant amount of uncertainty,” the report stated. “As situations evolve, we will gauge the macro and credit materiality of potential and actual policy shifts and reassess our guidance accordingly."
[READ MORE: Trump issues reciprocal tariff order]
The S&P report, “Tariffs Will Hurt U.S. Consumer Retail And Restaurant Companies — To Varying Degrees, And Depending On the Subsector” does not constitute a rating action, the company said.
S&P Global Ratings is the world's leading provider of independent credit ratings. It is a division of S&P Global.
